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Private Sector in Uganda Sees Growth in September: Stanbic PMI Report

private sector in uganda sees growth in september stanbic pmi report
private sector in uganda sees growth in september stanbic pmi report

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In September, Uganda’s private sector experienced an increase in employment and purchasing activity due to favorable demand conditions. This growth was driven by a continuous rise in new orders and improved business activity.

The monthly Stanbic Purchasing Managers Index (PMI) for September increased to 52.9, up from 51.6 in August. This marks the eleventh consecutive monthly improvement in the health of the private sector, slightly surpassing the series average of 52.6. Readings below 50.0 indicate a deterioration in conditions.

Christopher Legilisho, an economist at Stanbic Bank, noted, “The September data shows ongoing growth in business activity in Uganda’s private sector, now extending for 14 consecutive months. Employment has risen for the sixth month in a row, with higher new orders and efforts to reduce outstanding business cited as reasons. Rising new orders encouraged companies to increase their own purchasing activity in the final month of the third quarter, marking an 11-month trend of increased input buying.”

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The Stanbic PMI is compiled by S&P Global based on responses from purchasing managers in various sectors, including agriculture, mining, manufacturing, construction, wholesale, retail, and services.

The PMI is calculated as a weighted average of five indices: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%), and stocks of purchases (10%).

Legilisho further explained, “Improvements in customer numbers and new orders, coupled with marketing strategies, motivated companies to expand their business activities at the end of the third quarter. Output increased across all sectors covered by the survey.”

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However, the hiring of additional workers led to increased staff costs, and firms also reported higher purchase prices. In response to higher costs and growing demand, companies raised their selling prices. Cement, food products, and metal bars were among the items that saw price increases. Panelists also highlighted rising costs for construction materials, fuel, and utilities, resulting in overall input prices rising across all sectors.

Stocks of purchases continued to increase in September, driven by higher input buying, although they fell in the agriculture sector. Stronger customer demand allowed higher input costs to be passed on to clients, resulting in charges increasing for the sixth consecutive month. Purchasing activity expanded alongside the growth in new orders, leading to inventory expansion during the month.

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Despite longer supplier delivery times due to reported shortages, companies remained optimistic about increasing output in the coming year. This positive sentiment was primarily based on expectations of continued growth in customer numbers, with over 87% of respondents predicting expanded activity over the next 12 months.

However, new business from abroad decreased for the second consecutive month in Uganda’s private sector in September. New export orders have now declined for nine out of the past ten months, with only a temporary expansion in July.